NEW YORK CITY—It may have seemed like New York REIT's troubles were over, but it appears that's not the case.

The Witkoff Group and First Winthrop Corp. have sent NYRT's board a joint letter—which was released Thursday, expressing concerns about recent actions taken by the REIT that appeared to be an effort to fix the troubled company's problems. A NYRT spokesman did not respond to GlobeSt.com's request for comment by press time.

The letter, signed by Witkoff chairman and CEO Steve Witkoff and First Winthrop CEO Michael Ashner, says in part, “We think the appointment of Randolph Read as non-executive chairman of the board is a change in form only—there is no real corporate governance substance to it.” The missive also suggests a conflict of interest for some of the REIT's “independent directors,” including one who, “still serves on more than twenty sponsored entities including, most disturbingly, at least one that competes directly with NYRT. To us it feels more like cousins marrying than improved corporate governance.”

Witkoff and Ashner also question the wisdom of NYRT's plan to sell non-core outer borough assets at this time. “These are assets with leases that have 10% rent increases and renewal options. An almost irreplaceable income stream in today's market. In addition, the future redevelopment potential of these properties could be substantial. Why sell them now?”

The letter goes on to suggest the sale is meant to cover investor dividend payments. “We believe the decision to sell results directly from the company's inability to access capital markets in a manner non-dilutive to net asset value. More troubling is the issue as to whether these sales are needed to maintain a dividend which is certainly not covered by the company's current operating cash flow.”

NYRT's plans to sell equity interest and repurchase stock also are called into question by the investors. Altneratively, they close with an offer to help NYRT recover from its alleged missteps. “We believe the board should reconsider its rejection of open discussions with the Winthrop/Witkoff Group. Putting aside the ugly conflicts that exist when a sponsor and its management team are creating new vehicles that directly compete with NYRT, we believe the company would be acquiring a best-in-class, experienced management team willing to provide the company with both exclusivity and a substantial cash infusion, insuring its future growth.”

Other investors reportedly are concerned too, the letter writers note. “Since the annual meeting, we have met with and talked to a number of institutional investors who have shared with us their deep concerns relating to the company, its management, its choices and its direction. We also have listened to how we might improve the prior proposal. Consequently, the board can expect a revised proposal from us shortly. We certainly hope the company will be more open minded in its review and restrain itself from those steps which would be destructive of shareholder value in the interim.”

Instant Insights /

NYRT Investors Cite Grave Concerns…Again

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